Beware CEOs who golf
Thanks to everyone who came to the OpenSpace UnConference. Vibe from global investing world is large uncertainty. On traversing social norms and neurodiversity. Alex Edmans: End of ESG.
Thanks to everyone who came to the OpenSpace UnConference
Vibe from global investing world is large uncertainty re: recession, inflation, supply chain
Don’t let CEOs play too much golf
On traversing social norms and neurodiversity
Alex Edmans: End of ESG, or ESG as both important and nothing special
Links (end):
A deck on how to make excellent charts for visual story telling.
Evidence for the weak ties theory.
Probability on climate scenarios, showing under SSP2-4.5 that a 4c scenario is very unlikely.
Large meta-study: video games have virtually no impact either way on well-being.
On Carbon pricing and what some companies do
On importance of “shipping’ product
Moral arguments for challenge trials amongst other things
Why one can/might work defending corporate oil interests in law…
On loss and the point of life:
I’ve updated my view on the environmental theory of obesity
Thanks to everyone who turned up to the UnConference. Over 100 of you and we had the conversations only we could have. I continue to believe this type of format is excellent for different types of people to meet and for new ideas to be shared and the feedback has been great.
These are some example sessions (below), everyone can call a session (which you do at open circle ((failed to get a photo of this as my photogrpher was too engrossed)) and you go along and move between the sessions that interest you.
I held one on the new governance and voting system ideas. An engaged and thoughtful conversation. Thanks again everyone for making this special.
It’s conference season at the moment where the world’s companies come and tell the world’s investors what they are seeing. As a lens into the world, investing gives a broad view for the curious. My sense - on an overall world view - investors remain worried (and confused) on supply chain challenges, inflation (is it demand or supply, and where interest rates will go), and recession (timing, duration and depth); and geopolitics. The vibe… mostly seems cautious on ideas related to “growth” or the far-future.
I found this paper on CEOs and time spent playing golf intriguing.
…CEOs who play too much golf are associated with firms that have lower operating performance and firm values. Lower equity-based incentives are associated with CEOs consuming more leisure. Boards are more likely to replace CEOs who shirk…
There is a common sense mechanism here, with also now common practice solutions. The idea is that time spent playing golf is not time spent managing and thinking about the business, the second order issue might be the CEO not taking managing the business more seriously.
To counter this it seems larger amounts of equity (skin in the game) helps, as does a strong board. It also seems to me, this is why if CEO’s take too many other non-exec positions in other companies they - on average - cannot be spending as much time on managing their main company. Perhaps, certain super-hard working, unique individuals can possibly manage it (famously, Jack formerly of Twitter and Square/Block and Elon of Tesla and SpaceX), but at the margin it seems to be better to just be doing one!
Implications?
→ More equity pay
→ Stronger governance
→ CEOs need to concentrate on running the company (potentially implications on over-boarding) and not playing golf ?!
To summarize… the amount of leisure CEOs consume is a function of their economic incentives, and that some CEOs shirk their responsibilities to the detriment of firm performance and value.
Anoushka:
The Queue must represent a *field day* for ethnomethadologists. Those guys are interested in how social order is created in and through social interaction, and a queue is such a perfect example of social order. It immediately reminded me of “breaching experiments”. Have you heard of them?
They’re not really experiments - more, demonstrations which reveal the agreed social behaviours underpinning everyday social activities. A classic breaching experiment is pushing into a queue. Do that and you’ll quickly establish the “rules” around queuing.
Chaperoning a neurodivergent child around means life is one big breaching experiment. Through Spike, I regularly witness most of the classic examples of “breaching” - violation of the expectancy of shared verbal understanding, standing very close to people while engaging in conversation, not following rules when playing games, asking riders on the tube to give up their seats and, of course, intrusion into waiting lines (among many others).
It can be uncomfortable - for Spike, who is bewildered when things take an unexpected turn, and for me, performing an intricate social dance between him and the rest of society. My role is to remind Spike about social norms, risk assess social situations, repair breaches and pick my battles. I also need to maintain a sense of proportion. After all, some norms are not worth the paper they’re not written on.
It is also *fascinating*. Reactions to breaches reveal a lot about people who are subject to them. Unless a reaction is fragrantly unpleasant, I mainly (but not always) resist the temptation to write people off as “bad” when a reaction is negative. People can miscalculate or have an off day. But how much easier life is when people can roll with a breach.
One thing I have noticed is the effect of people who recognise the breach and perceive no harm or notice Spike’s neurodivergence and sanction it with kind words or some outward signal that they are not bothered. Often this signal ripples out to others nearby to positive effect. I love those people. I also love the classic Londoner who minds his/her own business.
Alex Edmans argues for viewing ESG like other intangibles this makes them important but not especially different from other long-term drivers of value: "ESG is both extremely important and nothing special. It's extremely important because it's critical to long-term value, and thus any practitioner or academic should take it seriously, not just those with "ESG" in their job title or list of research interests.
It's nothing special since it's no better or worse than other intangible assets that drive long-term value and create positive externalities, such as management quality, corporate culture, and innovative capability. The following implications follow:
1. Companies shouldn't be praised more for improving their ESG performance than these other intangibles; investor engagement on ESG factors shouldn't be put on a pedestal compared to engagement on other value drivers. We want great companies, not just companies that are great at ESG.
2. Investors who greenwash are correctly being held to account. But so should other investors who fail to walk the talk, such as actively-managed funds that closet index or systematically underperform. Clients of non-ESG funds deserve the same protection as clients of ESG funds.
3. Practitioners shouldn’t rush to do something special for ESG factors that they wouldn’t for other drivers of value, such as demand that every company tie executive pay to them, force a firm to report them even if not relevant for its particular business, or reduce complex intangibles to simple quantitative metrics.
4. Many of the controversies surrounding ESG become moot when we view it as a set of long-term value factors. It’s no surprise that ESG ratings aren’t perfectly correlated, because it’s legitimate to have different views on the quality of a company’s intangibles. We don’t need to get into angry fights between ESG believers and deniers, nor politicize the issues, because reasonable people can disagree on how relevant a characteristic is for a company’s long-term success."
Consider:
i. Be more granular. ESG is an umbrella term
ii. Be less monotonic
iii. Be less binary
iv. Be less quantitative
and
...Aggression and hyperbole are signs of weakness, not strength. As Karl Popper noted, “Whenever a theory appears to you as the only possible one, take this as a sign that you have neither understood the theory nor the problem which it was intended to solve.”
Paper here (Sep 2022): https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4221990
Links this week:
A slide on how to make excellent charts for visual story telling.
Evidence for the weak ties theory. Weak ties is one reason I hold mingles and meetups, because my acquaintances who meet up, go on to gain much value from the connections.
Probability on climate scenarios, showing under SSP2-4.5 that a 4c scenario is very unlikely.
Large meta-study - basically, video games have virtually no impact either way on well-being.
On Carbon pricing:
This essay looks at a project which has never really every fully ”shipped”. This argues for building and testing rather than only ever being in the “research” phase. It’s one reason I R&D and test out my performance lectures pretty much on a live audience, rather than only in script form.
I will be there Oct 1
Moral arguments for challenge trials amongst other things:
Why one can/might work defending corporate oil interests in law…
On loss and the point of life:
I’ve updated my view on the environmental theory of obesity, and now put some weight (no pun) on this being part of what is happening. Might part explain allergies and other factors too.